What expenses do PPOs cover?

Lucas was on a motorcycle when he fell and hurt his leg. It’s a good thing Lucas has PPO coverage and has managed to find a network doctor nearby. Unlike other health insurance plans, Lucas does not have to pay for his medical care until he receives it (instead of having to pay upfront). Lucas is responsible for paying for four things with his PPO coverage: a premium, deductible, coinsurance, and copays.

The premium is a fixed amount of money that the insurance company charges for coverage. Lucas’s premium amount is $150 a month. His employer pays his premium, so Lucas doesn’t have to worry about paying it.

A copay is a fixed fee that you must pay to a medical provider for a covered medical service. Copays are also known as copays. The copay amount varies, depending on the medical service received. Lucas has a $15 copay for each visit to a network doctor’s office. In this scenario, all Lucas has to pay is $15 for his time with the doctor. It’s important to note that copays don’t count toward your deductible or coinsurance. This means that if he gets a medical service that only requires a copay, he doesn’t have to worry about paying coinsurance or a deductible.

The deductible is a fixed amount of money that you must pay out of pocket for certain medical expenses before your PPO plan begins to pay your medical expenses. Lucas’s plan has a $150 deductible. While Lucas was at his appointment, his doctor took some X-rays, took a blood sample from Lucas to send to a lab, and put his leg in a cast. These expenses are separate from the time you spend with the doctor, which is covered by the copay. Lucas has to pay the first $150 of the cost of his x-rays, lab work, and cast; then the benefits of his PPO plan will begin to take effect.

Coinsurance is the percentage of your medical costs that you are responsible for after you have paid your deductible. Lucas’s coinsurance is 10 percent. Lucas was charged $950 for his X-rays, lab work, and cast. In addition to his $150 deductible, Lucas also has to pay 10 percent of the remaining balance, which is $80. Lucas leaves his doctor’s office with a total bill of $230 (plus an additional $15 copay, you pay at the time of the visit), but you feel much better!

Lucas also has an out-of-pocket maximum, which is the maximum amount of money Lucas has to spend on medical expenses each calendar year before his PPO plan pays all of his remaining medical expenses. Lucas’ maximum payout is $3,000. Once Lucas has spent $3,000 on his medical expenses in a year, he will not have to pay any additional medical expenses. His insurance company will pay for any additional medical treatment Lucas may need.

It’s important to note that some PPOs only have copays, while others only have deductibles and coinsurance. All PPOs have an out-of-pocket maximum.

Out-of-network providers

If Lucas had received treatment for his injury from a provider who was not in his network, his share of costs would have been higher. Whenever he receives treatment from an out-of-network provider, his copay, deductible, coinsurance, and out-of-pocket maximum increase substantially.

Suppose Lucas had received treatment from an out-of-network doctor. His copay may have been $50, his deductible $1,000, his coinsurance 30 percent, and his out-of-pocket maximum $10,000. Lucas would have been responsible for the entire bill of $950, plus a $50 copay. That’s a lot of money!

Advantages and disadvantages of PPO plans

The benefits of choosing a PPO plan may include:

Excellent choice of health care providers.
You may be able to see a specialist without a referral from a PCP
Ability to choose providers that are not in your network
Lower health care costs
Limited out-of-pocket cost due to out-of-pocket maximum
PPOs allow you to save money while staying in the network

Drawbacks of a PPO plan can include:

High costs associated with out-of-network providers
You may have to meet a deductible and may have copays depending on the service
More paperwork compared to other plan types, especially when using an out-of-network provider.

Key terms

preferred provider organization (PPO): a group of doctors, hospitals, and other health care professionals with whom an insurance company has a contractual agreement to provide health care services at a reduced rate to members
preferred provider: a health professional who is part of a PPO
in-network: a preferred provider that is part of a specific PPO
out-of-network: health professionals who are not part of a certain PPO
health insurance: a type of insurance used to help cover the cost of medical treatment
Primary Care Physician (PCP): A health care provider responsible for coordinating your health care needs
premium: a fixed amount of money that the insurance company charges for coverage
copay – a fixed fee that you must pay to the medical provider for a covered medical service
deductible – a fixed amount of money you must pay out of pocket for certain medical expenses before your PPO plan begins to pay your medical expenses
coinsurance – the percentage of your medical costs you are responsible for after you have paid your deductible
Out-of-Pocket Maximum – The maximum amount of money a patient has to spend on medical expenses each calendar year before a PPO plan pays all remaining medical expenses.